Teck Am. Inc. v. Valhalla Mining, LLC

• Docket Number: Supreme Court Nos.: S-18082/18101
• Decision Date: 21 April 2023
• Citation: 528 P.3d 30
• Parties: TECK AMERICAN INCORPORATED and State of Alaska, Department of Natural Resources, Appellants, v. VALHALLA MINING, LLC, Appellee.
• Court: Alaska Supreme Court

528 P.3d 30

TECK AMERICAN INCORPORATED and State of Alaska, Department of Natural Resources, Appellants,

v.VALHALLA MINING, LLC, Appellee.

Supreme Court Nos.: S-18082/18101

Supreme Court of Alaska.

April 21, 2023

James N. Leik and Elena M. Romerdahl, Perkins Coie LLP, Anchorage, for Appellant Teck American Incorporated. Brian E. Gregg, Assistant Attorney General, and Dana S. Burke, Senior Assistant Attorney General, Anchorage, and Treg R. Taylor, Attorney General, Juneau, for Appellant State of Alaska, Department of Natural Resources. Matthew Singer and Lee C. Baxter, Schwabe, Williamson & Wyatt, P.C., Anchorage, for Appellee.

Before: Winfree, Chief Justice, Maassen, Carney, Borghesan, and Henderson, Justices.

OPINION

CARNEY, Justice.

I. INTRODUCTION

After a mining company abandoned its mining claims, the claims were located and recorded by a second mining company, which also abandoned the claims. After the second company abandoned the claims, the first company attempted to cure its earlier abandonment. The same year that the first company filed to cure its abandonment, a third mining company attempted to locate and record ownership of some of the same claims. The Department of Natural Resources (DNR) refused to issue permits to the third company, reasoning that the first one had validly cured its abandonment of its claims before the third company located the claims. After exhausting its administrative remedies, the third company appealed DNR's decision to the superior court. The superior court reversed DNR's decision. Because DNR's interpretation of the controlling statute was reasonable, we reverse the superior court decision and affirm DNR's decision.

II. FACTS AND PROCEEDINGS

A. Facts

In 1994 Cominco American Inc. located and recorded ownership of a number of mining claims called the "Smucker" claims. It later conveyed the claims to a related company, CAI Inc., a Washington corporation authorized to do business in Alaska under an Alaska certificate of authority issued in 1999 (67504-F). CAI Inc. changed its corporate name three times: to Cominco American Inc. in 1999; to Teck Cominco American Inc. in 2001; and to TCAI, Inc. in 2008. Although Cominco American Inc. changed its name in 2001 to Teck Cominco American Inc. in Washington, it did not amend its Alaska certificate of authority to reflect this change. From 2001 to 2007 Affidavits of Annual Labor (AALs) listed the owner of the Smucker claims as Teck Cominco American Inc. even though it was not authorized to do business in Alaska at the time.

When Teck Cominco American Inc. changed its name to TCAI Inc. in 2008, it amended its certificate of authority to reflect the name change. But TCAI filed statements of labor that did not identify TCAI as the owner of the Smucker claims, which constituted an abandonment of those claims by statute in 2008.¹

In 2011 American Energies Resources, Inc. (AERI) located the abandoned Smucker claims and recorded ownership of them. AERI's successor abandoned the claims in 2016. In October 2017 TCAI attempted to cure its ownership of the Smucker claims under AS 38.05.265(b) by recording corrected statements of labor and paying the associated fees and penalties to DNR.² Two months later a third mining company, Valhalla, Inc., attempted to locate and record nearby claims called the "Jiffy" claims, many of which overlapped with the Smucker claims. TCAI then quitclaimed the Smucker claims to a related entity, Teck American Inc., the current holder.³

In February 2018 DNR's Division of Mining, Land and Water (the Division) sent notice to Teck acknowledging its reinstated ownership of the Smucker claims.⁴ In April the Division notified Valhalla that it would not issue a permit for some of its Jiffy claims because they overlapped with the Smucker claims. In November the Division granted all of Valhalla's land use permits for the Jiffy claims except the ones that overlapped with Teck's Smucker claims. The Division reasoned that Teck had cured its abandonment of the Smucker claims before Valhalla had located and recorded its claims, and Teck was therefore the rightful owner of the claims.

B. Proceedings

1. Appeal to DNR

Valhalla timely filed a formal appeal of the Division's decision with DNR in November 2018. Both Teck and Valhalla submitted letters to DNR in support of their ownership of the Smucker claims. In September 2019 DNR's Commissioner issued a final decision in favor of Teck. The Commissioner concluded that Teck had successfully cured its abandonment of the Smucker claims under AS 38.05.265(b). She rejected Valhalla's argument that Teck was not allowed to cure its abandonment once AERI had properly located and recorded ownership of the abandoned Smucker claims. The Commissioner reasoned that Teck was able to cure its abandonment under AS 38.05.265(b) because AERI had abandoned the claims when Teck filed the required documents to cure; therefore there were no active intervening claims preventing Teck from curing. The Commissioner also rejected Valhalla's argument that Teck was barred from curing its abandonment because it had previously failed to record statements of labor within the two-year period required by a different statute, AS 38.05.210(c).⁵ The Commissioner concluded that AS 38.05.265(b) did not place a time limit on a party's ability to cure its abandonment.

Valhalla appealed DNR's final decision to the superior court.⁶

2. Appeal to the superior court

Following briefing the superior court held oral argument in April 2021. The superior court reversed DNR's decision. The court first determined that DNR's interpretation of the process to cure abandonment of mining claims under AS 38.05.265(b) did not implicate DNR's expertise or its determination of fundamental policy. The court applied its independent judgment in interpreting the statute rather than the more deferential "reasonable basis" standard of review.

The superior court interpreted the word "location" in AS 38.05.265(b) to mean the physical staking of the claim with markers,⁷ and it found that once Teck's stakes or monuments had been replaced by AERI's, Teck could not cure its abandonment. The court found that the legislative history specifically contemplated that a person could cure abandonment of a claim if "no one had staked the intervening rights."⁸ The court emphasized that the purpose behind Alaska's mining laws was to encourage the development of resources and that the laws were "designed for miners out in the field ... not lawyers."⁹ It reasoned that Teck's attempt to cure did not involve "a small miner rushing to fix an error in filing," which it believed was the legislature's focus when passing the statute, but was an attempt to cure abandonment of claims "that occurred a decade before." The court concluded that the plain language of AS 38.05.265(b), in addition to its legislative history and purpose, supported Valhalla's interpretation that the statute precluded Teck's ability to cure once AERI located the abandoned Smucker claims and recorded ownership.

Teck and DNR separately appealed the superior court's decision. We consolidated the appeals.

III. STANDARD OF REVIEW

"When the superior court acts as an intermediate court of appeal, we give no deference to its decision. Rather, we review the merits of the administrative agency determination directly."¹⁰ "We review an agency's factual findings ‘to determine whether they are supported by substantial evidence,’ meaning ‘such relevant evidence as a reasonable mind might accept as adequate to support [the agency's] conclusion.’ "¹¹ There are two standards of review for an agency's interpretation of a statute: the reasonable basis standard and the independent judgment standard.¹² If "the interpretation at issue implicates agency expertise or the determination of fundamental policies within the scope of the agency's statutory functions," we apply the reasonable basis standard, deferring to the agency's interpretation "so long as it is reasonable."¹³ "If no agency expertise is involved in the agency's interpretation, we apply the substitution of judgment standard."¹⁴ Under the substitution of judgment standard, "we exercise our independent judgment, substituting it ‘for that of the agency even if the agency's [interpretation] ha[s] a reasonable basis in law.’ "¹⁵

IV. DISCUSSION

A. The Reasonable Basis Standard Applies.

The parties disagree whether the superior court applied the proper standard of review to DNR's conclusion that AS 38.05.265(b) allows curing the abandonment of a mining claim after that same claim has been located, recorded, and abandoned by a subsequent party. Teck and DNR argue that DNR's interpretation of AS 38.05.265(b) should be reviewed under a "reasonable basis" standard because it required the resolution of policy questions and implicated the agency's technical expertise. Valhalla argues that the superior court's "substitution of judgment/ independent judgment standard of review" was correct because interpreting AS 38.05.265(b) "does not implicate DNR's expertise in any way." We analyze both arguments to determine the correct standard of review.

Teck argues that this case is analogous to Alyeska Pipeline Service Co. v. State .¹⁶ In Alyeska Pipeline a company challenged DNR's interpretation of AS 38.35.140(a), which governs the calculation of a lease price.¹⁷ We applied the reasonable basis standard because DNR "has special expertise" and "is charged with granting the[ ] leases and adjusting and collecting their rent."¹⁸ Similarly in Marathon Oil Co. v. State, Department of Natural Resources we reasoned that because DNR manages the state's resources and collects royalties from gas lessees, the question whether to allow retroactive application of contract pricing was within DNR's expertise.¹⁹ We held "that the reasonable basis standard is appropriate when an agency's adjudication of a regulated party's claim ‘requires resolution of policy questions which lie within the agency's area of expertise and...